A statement of a country’s financial transactions and trade with the rest of the world takes place with the rest of the world over a particular time period
SOUTH AFRICA’S BALANCE OF PAYMENTS
It consists of FOUR accounts:
1. The Current Account
• Merchandise - It includes transactions in movable goods that change ownership between S.A. residents and non-residents.
• Net Gold exports - Shows net foreign gold sales + the change in gold of the SARB.
• Services - This includes transportation, travel, financial, insurance, professional, technical, recreational etc. services between South African residents and non-residents.
2. The Capital Transfer Account
- The balance shown reflects the net amount. This amount can be either negative or positive.
The capital transfer account includes: Transactions and grants relating to the ownership of fixed assets and other asset transfers by migrants.
3. The Financial Account
THREE categories in the Financial Account:
• Direct investments:
- Include transactions relating to investments in businesses for the purpose of obtaining a meaningful share (10%+) or control in such a business .
-it includes investment in and fixed property.
-known as FDI
• Portfolio investments:
- Purchasing or selling equities (ordinary shares) and debt securities (bonds or gilt-edged shares) that are not part of direct investments.
- These investments are mainly affected through stock exchanges
-Known as Hot Money
• Other investments: - Consist of transactions that cannot be classified as direct investments, portfolio investments or reserves (4th account of BoP). E.g. trade credits, loans, currency and deposits.
4. Changes in reserves
The change in net gold and other foreign reserves owing to balance of payments transactions is a balancing amount
• South Africa's reserves are not shown in BoP account because it represents a stock.
• The BoP shows flows only; therefore only changes to gold and... [continues]
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